Hello members,
I am currently working on H1B on work visa and my spouse is on H4 (Not working). On receiving my PR , I am planning to enroll her for a MS and I’ll continue working in USA till she completes her course (I will move to canada then)
Per Canadian tax regulations, having a spouse in Canada = having residential ties; So I need to pay Canadian tax as resident.
Do I need to pay Canadian tax on my whole US income or do I get to deduct any expenses on the USD before converting it to the CAD equivalent? As working completely outside Canada; do I get any exemptions on federal or provincial tax?
I did a rough math and the tax % seems scary ☹
Having residential ties does not mean a person is a resident for tax purposes. Who is a resident required to file a resident return is a very fact specific question. Canada Revenue website has detailed information. Many individuals can sort through the relevant criteria and assess their personal factual situation and determine if they are a resident for tax purposes. Otherwise a professional tax consultant, preferably a qualified or certified accountant, may need to be consulted.
An individual may be required to file a tax return even if NOT a resident. Again, who must do so is very specific to each individual, and the CRA website should have enough information to figure out if and when to file a NON-resident return.
In various situations it may be advantageous for an individual to file either a RESIDENT tax return or a NON-resident tax return. Again, this is very specific to each individual, and the CRA website should have enough information to figure out if and when a person should file a return even if one is not required.
Of course it gets a little more complicated figuring what tax to pay, and especially so if a tax return must be filed in both countries (I have been doing this for a very long time).
U.S. and CANADA TAX TREATY
The U.S. and Canada have a comprehensive tax treaty which, for the most part, means there is little or NO double taxation. Moreover, in most situations, if a person is a RESIDENT of one country (U.S. or Canada), that individual is NOT DEEMED a resident of the other.
Again, what taxes must be paid to which country gets a little complicated and again this is very specific to each individual.
Take the U.S. FICA taxes. Compare Canada CPP tax. There are specific forms which either an employer provides/files (I forget which) or a self-employed individual obtains, in order to be, in effect, excused from paying one or other to one of the countries, based on paying the respective taxes in the other country (again, this is relative to the U.S. and Canada, per specific treaty and agreements between the U.S. and Canada). This *deduction* (for paying the respective tax in the other country) eliminates being double taxed for these particular taxes respectively.
BUT YES, SOME REAL HOMEWORK IS NECESSARY . . . even if you go to an accountant, it can be difficult to find an accountant who really knows how to do taxes for someone with border-straddling issues. So it is imperative to do the research and figure out as much for yourself as you can BEFORE even talking to an accountant (otherwise you cannot be confident the accountant is competent to handle the situation).
The biggest difference in taxes between the two countries is largely the much higher sales tax paid in Canada, and it is mostly this which makes Canadians taxed more than Americans. In terms of income-related taxes, so far I find it comparable.
